Enovis Corporation

And welcome to the Inovus' third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. And to withdraw your question, please press star, then two. Please note this event is being recorded. And I would now like to turn the conference over to Kyle Rose. I know this is Vice President of Investor Relations. Please go ahead.

Thank you, Mayor Elise, and good morning, everyone. Thank you for joining us today for our third quarter 2023 results conference call. I'm Kyle Rose, Inovus' Vice President of Investor Relations. Our Matt Cerratola, Chairman and CEO, as well as Ben Barry, our Chief Financial Officer. Our earnings release was issued earlier this morning and is available in the investor section of our website, inovus.com. We will be using a slide presentation in today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on our website later today. During the call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. With respect to any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and in the appendix of today's slide presentation. With that, let me turn it over to Matt, who will begin on slide three.

Matt? Thanks, Kyle. Hello, everyone, and thanks for joining us today. As we previously announced, we had a very productive third quarter with continued share gain, solid margin expansion, and we announced the strategic acquisition of Lima that step changes our recon business. Let's go to slide three and talk about these highlights. We grew organically by 6% in the quarter with 10% growth in recon and 4% growth in P&R. That brings our year-to-date organic growth to 8%. We continued our trend of double-digit growth and share gain on the recon side versus a strong Q3 compare. We saw a return to more normal third quarter seasonality with some summer volatility in procedure volumes from vacations, which was in line with our expectations. We believe the elective surgery markets we serve remain healthy with higher than normal procedural demand in 2023 overall. A trend we expect will persist through 2024 and likely 2025 as pandemic-related patient backlogs are gradually worked down. In PNR, we had another strong quarter showing our reestablished leadership in these markets with a bit of share gain in a stable market environment. We expanded our adjusted EBITDA margins by 80 basis points, reflecting strong gross margin expansion from productivity, mix, and the scaling of recent acquisitions. In September, we announced a definitive agreement to require Lima Corporate, which expands our global reach and recon, taking that segment to about $1 billion in sales with close to 50% exposure to the faster-growing extremities markets. Overall, we remain on track for a great 2023 with strong momentum versus our strategic goals. Digging a little deeper in recon on slide four, we had double-digit growth in the U.S. led by 18% organic growth in hip and knee. Extremities grew 7% against a tough prior year comp of 17% in Q3 of 22. Outside the U.S., we grew almost 12% organically in a resilient market. I'm excited about the international growth opportunity as we expand our market position with good initial traction for our industry-leading Altivate and Empower products. Importantly, we have a strong pipeline of innovation in recon that we believe will allow us to continue to take share for many years to come. The ramp of our Empower revision knee remains in the early innings, And we also have launched an updated Arvis 2.0 with full Empower capability. Additionally, in foot and ankle, we recently launched the Evolve 34 Lapidus correction system for bunions, one of the fastest growing market segments in the U.S. We've had terrific feedback from surgeons on all three of these great new products. Turning to slide five, I want to take a moment to remind everyone about the exciting opportunity we have to advance our business with the acquisition of Lima. I was recently in Italy and Switzerland, meeting with the Lima and Mathis leaders and teams. We're making good headway on our integration planning activities, and I came away with increased conviction and excitement about the strength of the talent and the big opportunity that we have ahead. We have a lot of experience and track record doing acquisitions well, and are following our proven EGX playbook to make sure this one gets off to a great start and delivers strong strategic impact, financial contributions, and shareholder returns. The addition of Lima represents the next step in the evolution of Inovus as we execute against our strategic goal to build a high-growth MedTech innovator with a clear pathway for sustained operating margin expansion. This transaction, which is expected to close in early 2024, will reshape our mix to faster-growing, higher-margin recon and increase our exposure to the fastest-growing parts of the recon market and extremities. This accelerates our progress against our long-term strategic pillars of sustainable high single-digit organic growth, continuous margin expansion, and global scale. In P&R on slide six, our 4% organic growth reflects a healthy market environment and disciplined execution. This business is performing in line with our strategic plan. Global bracing growth is over 4% year-to-date with share gain from strong customer service, improving innovation, and MotionMD clinic conversions. We have a strong pipeline of innovation to drive additional growth, including a new OA knee brace called Roam, and the next generation of clinical electrotherapy products for our recovery sciences team. Gross margins in this segment expanded by 150 basis points as we continue to sustain traction on price versus cost and roll out additional EGX business system tools, which are driving notable productivity improvements. Moving to slide seven, before I hand it over to Ben, I want to reiterate our confidence in the team's execution year to date. We have a diverse global business, and while 2023 has thankfully been a bit more normal than recent years, it takes a lot of day-to-day execution from our team members around the world to consistently deliver the way we have. Our execution in 2023 shows our commitment and capability to create compounding shareholder value through high single-digit organic growth and continuous margin expansion. The high single-digit growth comes from our demonstrated ability to consistently grow recon double digits along with our stable low-to-mid single-digit P&R growth. The margin expansion comes from the structural gross margin expansion as we grow recon faster, supplemented by EGX productivity and scale, partially offset by growth investments and in-year headwinds. We will provide a more formal update for 2024 guidance on our fourth quarter call, but we are confident in our ability to continue to drive this compounding growth and margin formula and also ramp up the impact of recent acquisitions. Now I'll let Ben take you through the P&L details and the guidance increase.